Roeder v. Metropolitan Insurance and Annuity Co., 99-3962

• Decision Date: 18 October 2000
• Docket Number: No. 99-3962,99-3962
• Citation: 236 F.3d 433
• Parties: (8th Cir. 2001) JON B. ROEDER, PLAINTIFF - APPELLANT, V. METROPOLITAN INSURANCE AND ANNUITY COMPANY, DEFENDANT - APPELLEE. Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 433

236 F.3d 433 (8th Cir. 2001)

JON B. ROEDER, PLAINTIFF - APPELLANT,

V.

METROPOLITAN INSURANCE AND ANNUITY COMPANY, DEFENDANT - APPELLEE.

No. 99-3962

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Submitted: October 18, 2000

Filed: January 8, 2001

Appeal from the United States District Court for the District of Nebraska.

Before Bowman, Loken, and Hansen, Circuit Judges.

Loken, Circuit Judge.

This is an action to recover the proceeds of a life insurance policy issued to Norman E. Roeder, a Nebraska resident. Although the policy lapsed for nonpayment of premiums before Roeder died, his son, the policy beneficiary, asserts a right to recover the proceeds because the insurer, Metropolitan Insurance & Annuity Company failed to provide a lapse notice required by the policy and the Nebraska insurance regulations. Metropolitan moved for summary judgment, conceding for purposes of its motion that it failed to give the required notice. The district court granted summary judgment, concluding that Roeder's failure to pay any premium for 245 days after the policy lapsed was unreasonable as a matter of law. The beneficiary appeals. Concluding that the district court erred in failing to analyze this issue under the Nebraska law of equitable estoppel, we reverse and remand.

Roeder purchased the flexible premium policy in February 1984, when he was 57-years old. The policy provided $300,000 of term life insurance for an annual planned premium of $6,575, scheduled to be paid in semi-annual installments of $3,287.50 on February 7 and August 7 of each year. Metropolitan deposited each premium payment in an accumulation fund and withdrew the cost of insurance from that fund on a monthly basis. In the policy's early years, the planned premiums exceeded the cost of insurance. That excess, together with earned interest and the continuing semi-annual payments, were projected (but not guaranteed) to cover the rising cost of the term insurance until the policy expired when Roeder reached age 95. However, the policy was flexible -- Roeder could skip scheduled premium payments, change their frequency and amount, or withdraw from the accumulation fund, so long as the amount in that fund remained sufficient to keep the policy in force.

Because the accumulation fund's earnings were affected by interest rate changes, the policy warned Roeder that "the planned premium . . . may need to be increased to keep this policy and coverage in force." In addition, the policy provided that, if the accumulation fund became insufficient to pay the monthly cost of insurance --

there will be a grace period of 61 days . . . to pay an amount that will cover the monthly deduction. We will send you a notice at the start of the grace period. . . . If we do not receive a sufficient amount by the end of the grace period, your policy will then end without value.

Roeder made the scheduled semi-annual premium payments from 1984 until 1993, when he withdrew $27,115 from the accumulation fund. This withdrawal decreased both the face amount of the policy and the excess previously built up in the fund. Metropolitan's annual statement for the 1993-1994 policy year reported the precipitous drop in the accumulation fund and advised Roeder that continued payment of the scheduled premiums would only keep the policy in force until January 1997.

Roeder continued making the scheduled semi-annual payments in 1994, 1995, and 1996. In December 1996, Metropolitan sent him a regular billing statement advising that the next semi-annual payment was due on February 7, 1997. On January 7, 1997, Metropolitan sent a lapse notice advising Roeder that the accumulation fund was insufficient to pay that month's insurance charge, and he must pay $1,630.97 by March 16, 1997, to keep the policy in force. On January 21, Roeder made a regular semi-annual payment of $3,287.50. Shortly thereafter, Metropolitan sent him an annual statement for the 1996-1997 policy year. That statement reflected his January premium payment and advised:

If you continue to pay premiums as scheduled, on the basis of current interest rates and cost of insurance charges, your coverage will remain in effect until December 1997.

* * * * * *

If you make no further premium payments, on the basis of current interest rates and cost of insurance charges, your coverage will remain in effect until May 1997.

Because Roeder had already made the February 1997 scheduled payment, no further premium payments were "scheduled" until August 1997. Thus, the above-quoted reference to "further premium payments" is less than self-explanatory. A person familiar with this type of insurance could figure out the underlying problem from these annual statements -- Roeder was now 70 years old, the cost of the term insurance exceeded the scheduled premium payments, and his accumulation fund was too depleted to make up the difference during the entire period covered by a semi-annual payment. But it would have been difficult if not impossible to discern from the annual statements alone just when the accumulation fund would become insufficient to pay the next monthly insurance deduction. Thus, the policy sensibly obligated Metropolitan to provide Roeder a 61-day grace period to pay any premium shortfall and a notice of when that period would begin. ¹

Roeder made no further premium payments. He died of lung cancer in January 1998. Following his death, the beneficiary filed a claim for the policy proceeds, $272,115. Metropolitan denied the claim on the ground that the policy had lapsed on July14, 1997. Metropolitan's policy records include reproductions of a May 7, 1997, "lapse pending" letter advising Roeder that, to keep the policy in force, he must pay $1,742.16 by July 14, 1997, the end of a 61-day grace period; and a July 14, 1997, lapse notice advising Roeder that his coverage terminated that day for nonpayment of premium. The beneficiary asserts that Roeder never received these notices. Metropolitan did not send Roeder a regular billing statement for the August 1997 scheduled semi-annual payment because the policy lapsed on July 14.

In claiming a right to the policy proceeds, the beneficiary pleaded an estoppel theory. Metropolitan may not argue the policy lapsed or was cancelled, the beneficiary alleged, because Roeder's failure to pay any premiums due before his death was caused by Metropolitan's failure to send him (i) the May 1997 notice that additional premiums must be paid or the policy would terminate on July 14, and (ii) a regular billing statement for the August 1997 scheduled semi-annual payment. Metropolitan moved for summary judgment. Conceding for purposes of its motion that it failed to send Roeder a contractually required notice in May 1997, Metropolitan argued that the policy was not thereby extended indefinitely; rather, it terminated as a matter of law prior to Roeder's death in January 1998.

Applying Nebraska law, the district court granted summary judgment in favor of Metropolitan, concluding that its failure to provide the required lapse notice extended the policy's coverage only for a reasonable time, and that the policy lapsed before Roeder's death because his failure to pay any premiums for 245 days following the lapse was unreasonable as a matter of law. We review the grant of summary judgment de novo, viewing the facts in the light most favorable to the nonmoving party. Summary judgment is appropriate if there is no material fact in dispute and the evidence would not allow a reasonable jury to return a verdict for the nonmoving party. Se...